TAPS settled First Transit lawsuit for $420K

Michael Hutchins, Herald Democrat
TAPS Public Transit board of directors approved a $420,000 settlement agreement with former management provider First Transit earlier this year. (Michael Hutchins / Herald Democrat)

In an effort to resolve ongoing litigation, TAPS Public Transit settled more than than $2.3 million in liabilities with former management provider First Transit earlier this year, according to settlement documents obtained by the Herald Democrat. The settlement was one of two that was approved by the TAPS board of directors in late January.

In the settlement with First Transit, TAPS agreed to pay its former management provider $420,000 to settle any pending and future litigation.

“At the end of the day, and for the record, First Transit was extra professional to work with and we saved both sides plenty of money in litigation and probably, quite frankly, kept TAPS from going under,” Grayson County Judge Bill Magers said. “We could not have afforded to litigate this issue, I think.”

The lawsuit in question was first filed in early 2016 following the transit agency’s financial crisis in late 2015. In September 2015, details regarding TAPS’ rocky financial situation, including an estimated debt of more than $4 million, came to light with the resignation of former CEO Brad Underwood. The collapse led to the drastic downsizing of the company’s services, assets and coverage area as it attempted to bring its expenses down to a manageable level.

The lawsuit came as TAPS was considering options for future management services. Ultimately, following a request for proposals, TAPS contracted with Transdev for its management services. Transdev still provides those services for TAPS today.

As part of the settlement with First Transit, TAPS agreed to pay the settlement on or before Dec. 31, 2017. Following the payment, both parties agreed to a motion to dismiss the lawsuit with prejudice and release each other from future suits.

For his part, Magers said the settlement was a good deal for TAPS as it avoided a lengthy and costly court case.

“We settled more than $2.3 million in debt — (which) with interest is closer to $2.8 million — for just $420,000,” he said.

Magers declined to comment on where the funds for this settlement came from. Calls to First Transit for comment were not immediately returned Tuesday.

The documents were obtained by the Herald Democrat through a Freedom of Information request that was filed in late January following the board action.

“Both of the agreements contain confidentiality agreements, with the exception of what we legally have to disclose,” Magers said. “And so we had to show we had to legally disclose this. We thought this would be the outcome.”

The second settlement involved a lawsuit against TAPS by Conway Company CPAs, who were previously provided accounting services to TAPS, including during and prior to the 2015 financial crisis. Magers said TAPS was able to settle the $75,000 lawsuit for just $18,000.

“I think I only saw Conway at one meeting in January 2015 just after I took office,” Magers said. “For your accountant not to report to meetings, I think, says volumes about that situation.”

Neil Conway, a managing partner for Conway Companies, said it had conducted audit services for TAPS for three years. Conway said Conway was simply an auditor for the company and was not its primary accounting service.

“I think it is public opinion that they had a modified opinion of their audit for 2013,” Conway said, describing it as the start of questions for TAPS leadership on the organization’s finances.